Abstract:Constructing portfolios with high returns and low risks is always in great demand. Markowitz (1952) utilized correlation coefficients between pairs of stocks to build portfolios satisfying different levels of risk tolerance. The correlation coefficient describes the linear dependence structure between two stocks, but cannot capture a lot of nonlinear independence structures. Therefore, sometimes, portfolio performances are not up to investors' expectations. In this paper, based on the theory of copula by Sklar… Show more
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